Corporation receives extension for IC-DISC election

Plain-English summary

A domestic corporation was formed to operate as an interest charge domestic international sales corporation (IC-DISC) for its parent. Its treasurer relied on an accounting firm and CPA to make the required election, but the Form 4876-A deadline was inadvertently omitted from the CPA's monitoring system. After discovering the missed filing, the corporation sought relief and represented that a late election would neither prejudice the government nor put it in a better position. The IRS found that the regulatory relief requirements were met and granted 60 days from the ruling date to file Form 4876-A for the corporation's first tax year. The ruling did not determine whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: Could the corporation file a late Form 4876-A election to be treated as an IC-DISC?
• Outcome: Approved. The corporation received 60 days from the letter date to file the election.
• Key authorities: IRC § 992(b); Temp. Treas. Reg. § 1.921-1T(b)(1); Treas. Reg. §§ 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201433004
Third Party Communication: None
Release Date: 8/15/2014
Date of Communication: Not Applicable
Index Number: 9100.22-00, 992.02-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:INTL:B06
PLR-105607-14
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Date:
May 13, 2014

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Legend

Taxpayer = -------------------------------------------------------------------- Accounting Firm = -------------------------------
CPA = ------------------------------
Company = ------------------------------------------------ Individual = ----------------------- Year 1 = ------- Date 1 = ------------------

Dear ----------------:

This responds to a letter dated January 24, 2014, submitted by Accounting Firm requesting that the Internal Revenue Service (“Service”) grant Taxpayer an extension of time under Treas. Reg. §§ 301.9100-1 and 301.9100-3 to file Form 4876-A (“Election To Be Treated as an Interest Charge DISC”) for Taxpayer’s first taxable year.

The rulings contained in this letter are based upon information and representations submitted by Taxpayer and Accounting Firm and accompanied by affidavits and penalty of perjury statements executed by appropriate parties. This office has not verified any of the materials submitted in support of the request for rulings. It is subject to verification on examination.
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FACTS & REPRESENTATIONS

Taxpayer, a wholly owned subsidiary of Company, is a domestic corporation that sells products manufactured by the Company on a commission basis.

In Year 1, Company decided to establish an interest charge domestic international sales corporation (“IC-DISC”) and engaged an attorney to complete the necessary organizational documents. Taxpayer was incorporated on Date 1 and began operating as an IC-DISC.

Individual was appointed as Taxpayer’s Treasurer at the time of Taxpayer’s incorporation. Individual relied on Accounting Firm and CPA to make the necessary elections to qualify Taxpayer as an IC-DISC.

As a result of an inadvertent oversight, the due date for filing Form 4876-A was not entered into the CPA’s due date monitoring system. After Taxpayer discovered in late Year 1 that the Form 4876-A had not been timely filed, CPA advised Taxpayer that the best course of action to remedy the situation was to seek a private letter ruling granting an extension of time to file Form 4876-A for Year 1, its first taxable year.

Taxpayer represents that the extension does not prejudice the Government’s interests and that Taxpayer is not placed in a better position by making the election at this time than it would have been in had the election been timely made.

LAW AND ANALYSIS

Section 992(b)(1)(A) provides that an election by a corporation to be treated as a DISC1 shall be made by such corporation for a taxable year at any time during the 90-day period immediately preceding the beginning of the taxable year, except that the Secretary may give his consent to the making of an election at such other times as he may designate.

Section 992(b)(1)(B) provides that such election shall be made in such manner as the Secretary shall prescribe and shall be valid only if all persons who are shareholders in such corporation on such first day of the first taxable year for which such election is effective consent to such election.

Temporary Treasury Regulation § 1.921-1T(b)(1) provides, in part, that a corporation electing IC-DISC status must file Form 4876-A and that a corporation electing to be treated as an IC-DISC for its first taxable year shall make its election within 90 days after the beginning of that year.

1
As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
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Treasury Regulation § 301.9100-1(c) provides, in part, that the Commissioner, in exercising the Commissioner’s discretion, may grant a reasonable extension of time under the rules set forth in Treas. Reg. §§ 301.9100-2 and 301.9100-3 to make a regulatory election under all subtitles of the Code except subtitles E, G, H, and I.

Treasury Regulation § 301.9100-1(b) provides that a regulatory election is an election whose due date is prescribed by a regulation published in the Federal Register, or a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin. For this purpose, an election includes an application for relief in respect of tax.

Treasury Regulation § 301.9100-3(a) provides that requests for extensions of time for regulatory elections that do not meet the requirements of Treas. Reg. § 301.9100-2 (automatic extensions) must be made under the rules of Treas. Reg. § 301.9100-3. Requests for relief subject to Treas. Reg. § 301.9100-3 will be granted when the taxpayer provides the evidence (including affidavits described in Treas. Reg.
§ 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and that the grant of relief will not prejudice the interests of the Government.

Based on the facts and representations submitted with Taxpayer’s ruling request, we conclude that Taxpayer satisfies Treas. Reg. § 301.9100-3(a). Accordingly, Taxpayer is granted an extension of time of 60 days from the date of this ruling letter to file Form 4876-A. Such filing will be treated as a timely election to be treated as an IC-DISC for Taxpayer’s first taxable year.

The granting of an extension in this ruling letter is not a determination that Taxpayer is otherwise eligible to make the election or to claim IC-DISC status or benefits. See Treas. Reg. § 301.9100-1(a). Taxpayer should attach a copy of this ruling letter to its Federal income tax return for the taxable years to which this letter applies.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter.
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In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representatives.

Sincerely,

_______
Marissa K. Rensen
Assistant to the Branch Chief, Branch 6
Office of Associate Chief Counsel (International)